Monday, 30 October 2017

It's taken me a few days to get round to writing this but there was a BAT Investor Day held in London last week that threw up a small, but vital, nugget of information.

Wells Fargo Securities circulated a summary of the event via email and described the presentation on next generation products (NGPs) as "the highlight". It spoke of how the global NGP category is likely to reach £30bn by 2020 and how both BAT and PMI expect NGPs will represent 30% of their revenue by 2030. Between them, the companies are now operating in 43 markets (PMI 31, BAT 12) after investing literally billions in R&D and roll-out, and both companies have struggled to reach manufacturing capacity to fully satisfy demand.

But this particular piece of info tells a huge story:

"In terms of profitability, BAT expects tobacco heating product (THP) margins will be higher than combustible cigs and sees vapour margins even higher than THP given that vaping taxes are lower."

You have to bear in mind that this is financial information the company is under an obligation to report truthfully to their shareholders, and there are stiff penalties if they mislead them (just look at Tesco recently). It's not the kind of airy-fairy say-the-first-thing-that-comes-into-your-head propaganda more preferred by the tobacco control industry. No, instead BAT have looked at profitability and identified that e-cigs and heat not burn both offer them more potential profit than traditional combustible tobacco, with the highest margin being derived from vaping products.

I've mentioned this before, but if you seriously want to know why the tobacco industry has gone headlong into reduced risk products in the past few years, there is a very simple reason. It's because they will earn more money out of them. Period.

Cigarette profit margins v E-cig profit margins

Cigarette profit margins v Heat not burn profit margins

Now, considering this hierarchy of profit within the industry, you have to wonder at the mentality - and motivation - of tobacco control conspiracy theorists who claim that it's all a plot to keep smokers smoking instead of quitting. Here's an example from one such cretin who still makes this same claim to this day:

Only the most naïve or captured advocates for vaping could fail to acknowledge that the tobacco industry wants people who vape to smoke and vape, not vape instead of smoking.

Erm, why would any company want its customers to continue using its least profitable products when they have more profitable ones to offer? In reality, much of the reason that the tobacco industry isn't bombarding smokers globally with marketing to make them switch to NGPs is because governments - aided and abetted by tobacco control lobbyists fearful of losing their lucrative seat on the gravy train - have banned them! So if they can't sell their most profitable products they are locked into a situation where they can only, by law, sell their less profitable ones.

We are therefore in this bizarre new world where industry is desperate to sell less harmful products because they are more profitable, while 'public health' runs around spreading misleading information and lies to ensure that the more dangerous combustible tobacco is the only product available. It's a simple and classic case of "follow the money".

Many in public health will often condemn industry for putting pursuit of profit ahead of health, yet all over the world now, it is clear that 'public health' is the greatest threat to the public's health when it comes to nicotine. And, in much the same way as we are on the side of the angels here, it is increasingly also clear that it is now industry working to reduce harm, while the tobacco control cartel works furiously to prolong it.